Westfield still scrambling to shore up restructure deal

If Frank Lowy really wanted to quell the shareholder revolt at Westfield Retail Trust, there is a devilishly simple solution – make the merger offer fairer.

Instead he and his sons Stephen and Peter, have opted to hold a gun to the heads of WRT unitholders, threatening to spin out yet another company from the Westfield Group mothership that potentially could marginalise WRT.

The threat was revealed late last Thursday at a tumultuous round of meetings in Sydney, as WRT institutional investors voted down the original proposal in a stunning rebuke to the Lowy family, prompting chairman Dick Warburton to adjourn the meeting.

In a mailout to unitholders this week urging them to vote for the original proposal, Warburton said the vague new option to spin out a rival company could have "a number of implications for Westfield Retail Trust and security holders" which could be "materially adverse".

But in a bizarre twist, he then adds: "However it is not possible to be definitive about the possible implications because the details of the Westfield Group's separation plan are not available and in any event the Westfield Group securityholders will need to approve the separation proposal."

This week in the NSW Supreme Court, Justice Paul Brereton set June 20 as the date for the meeting to be reconvened.

But only unitholders registered on May 27 will be eligible to vote, which has angered those opposing the deal as it will deny them the opportunity to lift their holdings to shore up a no vote.

While major WRT shareholders, led by industry fund UniSuper and Colonial First State, have maintained their opposition to the bid, it is expected that Westfield Group now will target the 77,000 small shareholders who abstained from voting with a media and direct marketing blitz.

Investment bank UBS, which took carriage of the deal, is now frantically trying to shore up institutional support or face the possibility of losing a lucrative success fee.

The transaction requires 75 per cent approval from WRT investors, but only managed a 74.1 per cent yes vote from proxies cast ahead of the first meeting.

Shareholder opposition

The Australian Shareholders Association has opposed the deal and urged its members to vote against it on the grounds that it is unfair, primarily because Westfield Group will contribute just 31 per cent of the shopping centre assets but end up with 48.6 per cent of the merged company, to be renamed Scentre.

The ASA also expressed its concerns that the Lowy family sold its $665 million stake in WRT just months before orchestrating a merger on what it sees as unjust terms.

The historic decision to adjourn the meeting, which was approved by unitholders last week after the new proposition was mentioned just hours earlier, has left some investors angry - they argue the idea was concocted on the day in desperate bid to stave off defeat.

The merger is the third major restructure of the Westfield empire in a decade. It amalgamated separate arms into a single entity 10 years ago, then hived off WRT in the aftermath of the financial crisis four years ago.

Rather than put all the Australasian assets into WRT, however, it established the trust as a half owner of the Australian and New Zealand shopping malls, with the other half share and management rights in the much larger Westfield Holdings.

Apart from the original Lowy family investment in both companies and board representation, WRT and Westfield Holdings were independent of each other.

The transaction before shareholders now proposes Westfield Holdings transfer its half share of the malls and the management rights - along with a large pile of debt - in exchange for shares which once again will establish a shareholding link between the two entities.

One thing though seems certain. After sweetening the deal in early May by $300 million in an attempt to woo dissident shareholders, Frank Lowy appears to be in no mood to offer anything more.